2002 (11) TMI 558 - AT - Central Excise

Tribunal sets aside duty demand, citing limitation issue

The tribunal ruled in favor of the appellants, setting aside the duty demand of Rs. 3,09,513 for the period April 1990 to February 1994. The tribunal ... Demand - Limitation Issues:1. Duty demand on hard waste cleared without payment of duty.2. Justification for invoking the longer period of limitation.3. Applicability of duty at single yarn stage.4. Discrepancy in duty payment at different stages.5. Disagreement on the point of limitation between Member (Judicial) and Member (Technical).Issue 1: Duty demand on hard waste cleared without payment of dutyThe appellants manufactured single yarn for captive consumption in the production of double/multifold yarn without paying duty on the single yarn. The hard waste arising during the manufacturing process was cleared by the appellants at nil rate of duty. The Revenue demanded duty amounting to Rs. 3,09,513 for the period April 1990 to February 1994, contending that duty should have been paid at the single yarn stage. The appellants challenged this demand, arguing that they paid duty on the double yarn and that the hard waste was cleared at nil rate of duty as approved by the Revenue in their classification lists. The tribunal found that the demand was barred by limitation as the appellants were paying duty at the double yarn stage and clearing hard waste at nil rate, indicating non-payment of duty on the single yarn. The tribunal set aside the demand, ruling that the longer period of limitation was unjustified.Issue 2: Justification for invoking the longer period of limitationThe Revenue invoked the longer period of limitation for demanding duty, alleging suppression and misstatement by the appellants to evade payment. However, the tribunal found that the Revenue's reasoning for invoking the longer period was not justified. The tribunal noted that the appellants were transparent in their duty payment at the double yarn stage and clearance of hard waste at nil rate, as approved by the proper officers. The tribunal emphasized that the Revenue had the opportunity to investigate further or seek clarifications when approving the classification lists but failed to do so. Consequently, the tribunal ruled that the demand was beyond the normal six-month limitation period and set aside the impugned order.Issue 3: Applicability of duty at single yarn stageMember (Technical) held that duty on single ply yarn is payable as per Supreme Court judgments, emphasizing that the duty arises at the single yarn stage itself. The Member disagreed with the view that duty could be paid at the double or multifold yarn stage, as the duty liability is triggered upon the manufacture of single yarn. The Member upheld the demand of duty against the appellants, stating that the extended period of limitation was applicable due to non-disclosure of manufacturing single ply yarn for captive consumption.Issue 4: Discrepancy in duty payment at different stagesThere was a discrepancy in the duty payment process at different stages of yarn production. While the appellants paid duty on the double yarn, the issue arose from the clearance of hard waste at nil rate without paying duty on the single yarn. The tribunal clarified that duty should have been paid at the single yarn stage to avoid duty payment at the subsequent stages, as per Notification No. 47/90-C.E. The disagreement on duty payment stages led to the demand for duty and subsequent penalty imposition, which was upheld by Member (Technical).Issue 5: Disagreement on the point of limitationA difference of opinion arose between Member (Judicial) and Member (Technical) regarding the applicability of the extended period of limitation. Member (Judicial) held that the demand was barred by limitation, while Member (Technical) upheld the demand and penalty imposition. The Third Member decision favored the view of Member (Judicial), ruling that the demand was time-barred, and the appeals were allowed on the point of limitation.---